Incident Overview
The company's revenue/net profit attributable to mothers/net profit after deducting non-attributable net profit/operating cash flow in 2024Q1 was 13.53/2.50/2.34/0.18 billion yuan, respectively, up 4.84%/-2.09%/6.93%/-88.29% year-on-year. According to our analysis, the slight decrease in return to mother was mainly due to a drop of 28 million yuan in government subsidies. The higher growth rate of deducted non-net profit than the growth rate of revenue was due to the increase in gross margin, and the decline in operating cash flow was mainly due to the increase in bonuses.
Analytical judgment:
The increase in gross margin and the decline in net interest rate were mainly due to a decrease in government subsidies and an increase in sales expenses, and deducted non-net interest rates remained flat. In 24Q1, the company's gross margin, net profit margin, net profit margin after deduction was 67.8%/18.5%/17%, up 1.7/-1.3/0.2PCT year-on-year. Sales/management/R&D/finance expense ratios were 36.18%/6.20%/1.59%/-0.89%, respectively, with a year-on-year increase of 1.35/0.14/-0.11/-0.65PCT. Other income accounted for 1.43%, down 2.27PCT year on year, mainly due to government subsidies falling 60% year on year to $0.19 billion; asset impairment losses accounted for 1.33%, up 0.57 PCT year on year, credit impairment losses were 0.25%, down 0.05 PCT year on year; non-operating income/revenue was 0.05%, down 0.11 PCT year on year, and income tax/revenue was 4.73%, up 0.03 PCT year on year.
Inventories declined. The 24Q1 company's inventory was 1,069 billion yuan, down 0.6% year on year and 7% month on month. This also shows to a certain extent that the company's winter preparations are insufficient. The number of inventory turnover days was 241 days, an increase of 0.7 days over the previous year. Accounts receivable were 703 million yuan, up 3.1% year on year, and the number of accounts receivable turnover days was 45 days, the same as year on year. Accounts payable were $395 million, up 23% year over year, and accounts payable turnaround days was 87.58 days, up 15.6 days year on year.
Investment advice
According to our analysis, (1) The decline in government subsidies and weather disturbances affecting Q1 were all short-term effects. Against the backdrop of sluggish consumption, we prefer brands with room to open stores and expand their area. HAZZYS is still the brand we are most optimistic about for growth. The core is excellent operating indicators such as successful franchisee model and store efficiency. (2) The main brand is on the formal wear track and growth rate is limited, but it is also benefiting from the clean-up of the industry and the introduction of new categories of young sports, leisure and sports suits, which are expected to accelerate store opening in 24 years; (3) Le Feiye and Kemiche are expected to replicate the operating experience of Hajis. Maintaining the 24/25/26 revenue forecast of 62.1/71.7/8.24 billion yuan, maintaining the 24/25/26 net profit forecast of 8.4/10.0/1.17 billion yuan, corresponding to the 24/25/26 EPS of 0.58/0.69/0.80 yuan, and the closing price of 5.55 yuan on April 26, 2024 corresponding to the 24/25/26 PE was 9.6/8.1/6.9 times. Short-term factors did not hinder long-term growth, and maintained a “buy” rating.
Risk warning
There is a risk that the store opening schedule falls short of expectations, the risk of slowing online growth, the risk of high sales expenses, and systemic risks.